Deal In Works For South Shore Line

December 05, 1989|By Gary Washburn, Transportation writer.

Creditors of the bankrupt Chicago, South Shore & South Bend Railroad are studying a reorganization plan under which the South Shore would be sold to another company and its commuter operation spun off to an Indiana public transit agency.

The proposal, if approved, would help bring long-term stability and improved service to the passenger operation, said Gerald Hanas, general manager of the Northern Indiana Commuter Transportation District.

Under the plan, a subsidiary of Anacostia and Pacific Co. would pay $27 million in cash for the railroad and assume about $7.6 million in liabilities.

Anacostia would retain the South Shore`s freight operation, its main business, but would sell the passenger service to the district for $3.9 million.

Hanas said his agency has money set aside for the purchase.

Until now, the district has contracted with the South Shore to provide passenger service, paying a fee for the operation of trains and agreeing to cover all operating losses. But the railroad`s current owners, under financial pressure and embroiled in a dispute over money with the district, threatened earlier this year to stop running commuter trains.

Direct ownership of the passenger service promises more efficient and cost-effective operation, Hanas said.

Surveys have shown that passengers want station parking lot improvements, increased service to relieve overcrowding on trains, and the ability to buy monthly passes more conveniently, Hanas said.

But the South Shore`s management ``had no incentive to make those improvements because there was no profit potential for them,`` Hanas said. A tickets-by-mail program would have allowed riders to avoid lines, for example, but has never been been adopted, he said.

The reorganization plan needs to be accepted by a majority of the South Shore`s creditors, and those voting in favor must represent at least two-thirds of outstanding claims.

The deadline for receiving ballots from creditors is Dec. 8, said Leroy Inskeep, the railroad`s trustee. A hearing in U.S. Bankruptcy Court has been scheduled for Dec. 11 when approval of the reorganization plan is expected to be considered, he said.

Under the plan, the railroad`s two biggest creditors, Citicorp North American Inc. and Heller Financial Inc., would get at least $21 million of the $27 million they claim they are owed.

The South Shore, which operates between South Bend and Chicago`s Randolph Street Station, carries more than 12,000 commuters a day, many of them Indiana residents who travel to jobs in Chicago. Ridership has grown sharply in recent years, and rush-hour trains often operate at 120 percent of seated capacity, officials said.